Credit Market’s Three Big Debates

Andrew Sheets and Vishy Tirupattur discuss three major topics in credit markets: private credit, the M&A cycle, and funding for AI infrastructure. Vishy defines private credit as lending to small and medium-sized companies by non-banks, noting concerns about opaqueness but not seeing systemic risk. Andrew addresses the M&A cycle, dismissing concerns of excessive lending aggressiveness compared to past cycles due to more conservative structuring and higher equity contributions in current LBOs. Vishy estimates substantial capital expenditure for AI data centers, projecting that a significant portion will require credit financing, particularly through asset-based finance, highlighting the differences between the current AI-driven CapEx and the telecom boom of the late 90s, emphasizing the stronger financial positions of today's hyperscalers.